Energy bills will rise more than 60% this year

19 June 2008 / by Rachael Stiles

Energy industry experts have predicted energy bill rises of 40 per cent by the end of 2008, but uSwitch.com expects the total increase for the year to be 61 per cent following previous increases.

As power companies struggle to maintain profitability in light of a trebling in wholesale gas prices, the 40 per cent increase in energy costs will mean that households will be paying an average annual bill of £1,467 this winter - £555 more than last year.

According to uSwitch, the increase will push an additional 1.6million Britons into fuel poverty – whereby at least 10 per cent of income is spent on heating the home – a 36 per cent increase, taking the total number to 6.1million.

Mervyn King, Governor of the Bank of England, has been forced to write a letter to the Chancellor Alistair Darling this week as inflation is soaring towards four per cent – double the bank's target. Mr King said yesterday that the UK is facing "the most difficult economic conditions in two decades", painting a bleak picture for future household outgoings.

While household income has risen £44 per month this year, expenditure on essentials such as fuel, energy, food, and mortgage payments

have increased by £148 per month – nine per cent higher than for the same costs as last year.

"The days of cheap energy are over," says Ann Robinson, director of consumer policy at uSwitch.com. "Households could see the largest ever increase in household energy bills this year. If suppliers do increase bills by a further 40 per cent by this winter then consumers will have seen a 61 per cent or £555 increase in household energy bills in a year. If average energy bills do hit £1,467 by the end of 2008, spending on energy will account for 5 per cent of the average household's net income."

Consumers cannot afford to ignore the outlook, she said. "They need to take action now to stand any chance of limiting the impact of higher prices. Online energy plans remain a good option for those who want to pay a lower price now and are happy to take their chances on the market in the future.

"However, fixed or capped price plans could be a lifeline for those who are more vulnerable to price rises. These plans carry a premium, but if you've never switched before you will probably still save money immediately by moving to one. However, the best fixed and capped deals are disappearing fast so consumers need to act quickly."